Question: How do VCs mitigate risk in their investment portfolios? Are VCs simply looking to diversify the type and stage of companies in which they invest, or do they employ other financial hedging strategies? I’m not aware of VCs using classic financial hedging strategies. In many cases, they are prohibited from doing this by their LP agreements […]
Question: I am a startup about to receive a convertible loan investment. My friend has been advising me on an adhoc basis re. the financials on a barter basis with me. Now he’d like to formalise his agreement with the company. He has made his money as an entrepreneur and now travels alot but will […]
In today’s episode of our convertible debt series, we discussion a few other terms that come into play with a transaction. Interest Rate: We believe interest rates on convertible debt should be as low as possible. This isn’t bank debt and the funders are being fairly compensated through the use of whatever type of discount […]
In today’s installment of our convertible debt series, we cover a specific case where the company is acquired before the debt converts into equity. There are a few different scenarios. The lender gets its money back plus interest. If there is no specific language addressing this situation, this is what usually ends up happening. In this […]
Question: A company I used to work for has registered to IPO. Apparently I have to wait 180 days until after the company goes public to sell. Is this typical? When do investors get to sell? What happens when everyone gets to sell at that 180 day point? Does the stock usually tank? Or is […]
We continue our convertible debt series today with a discussion about conversion mechanics. This is a very important term, but usually one that everyone can be happy with at the end if they concentrate on it. In general, debt holders have traditionally enjoyed superior control rights over companies with the ability to force nasty things […]
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